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Stocks started off strong yesterday as a result of encouraging
economic data and a strengthening U.S. economy. For several hours,
the Dow Jones Industrial Average (
DJI
) showed a triple-digit gain. But when it became known that
European leaders at a summit were discussing bilateral loans to
Greece, the U.S. dollar rose sharply against the euro, and stocks
began to sell off.

Financial stocks led the rally earlier in the day, and were up
as much as 2.5%, but when the dollar gained strength, profit-taking
drove down the bank stocks, and materials stocks -- which also had
been strong -- faltered as well. By the close, profit-taking and
the dollar's turnaround resulted in a broad reversal of the stock
market.

That's not to say that all was sour. Several companies reported
better-than-expected earnings.

Best Buy's (
BBY
) strong earnings helped retailers close out the day with a 1.2%
gain. Qualcomm (
QCOM)
increased its earnings outlook, but even though that helped the
technology sector, the Nasdaq (
NASD
) still closed at a loss.

Initial jobless claims for the week ended March 20 totaled
442,000, which was less than the expected 450,000, and down 14,000
from the prior week. But continuing claims came in at 4.65 million,
which was a bit more than expected, but still down from the week
before.

At the close, the Dow was up five points to 10,841, the S&P
500 (
SPX
) was down 2 points to 1,166, and the Nasdaq ended the session down
1 point to 2,397.

The NYSE traded under 1.2 billion shares with decliners over
advancers by 4-to-3. The Nasdaq crossed 687 million shares with
decliners ahead by 8-to-5.

Crude oil for May delivery closed at $80.40, down $.21, and the
Energy Select Sector SPDR (
XLE
) closed at $56.06, down 96 cents.

June gold was fixed at $1,094.10 an ounce, up $4.20.
However, in after-hours trading, gold gave up its gain when the
president of the European Central Bank commented negatively on the
intervention by the International Monetary Fund (
IMF
) in Greece"s financial affairs. The PHLX Gold/Silver Sector Index
(
XAU
) closed at $158.31, down $2.79.

What the Markets Are Saying

On Wednesday, my message was that in a non-conventional and
unpredictable technical market, the only meaningful indicator is
the chart itself, and so with new highs each day, the trader had no
recourse but to be long stocks.

Yesterday, the market expressed its unpredictability again when
just after traders had established new positions, in only one hour,
it reversed down. This new signal is probably the most significant
technical event since the reversal down in mid-January and will no
doubt be analyzed by every pundit.

As a result of opening higher, making new annual highs, then
closing at the lows of the day, the most visible indices
established a "key reversal day" -- an important message that near
term the rally is over.

For traders, that means that the positions taken just two days
ago must be immediately covered (sold). All the broad-based
indices, including the S&P 500, NYSE Composite, Nasdaq, and the
Russell 2000 (
RUT)
have triggered our own internal proprietary indicator -- the
Collins-Bollinger-Reversal (
CBR
).

I know that many of our readers will accuse me of poor timing in
that, on Wednesday, it appeared that I turned bullish. You will
note, however, that Wednesday's opinion was based solely on
momentum and that I warned of high risk. This is the negative of
short-term trading, but it need not turn into a disaster unless the
signal is ignored. Traders should always use stop-loss orders to
protect against sudden reversals.

At first glance, yesterday's turn down on low volume does not
appear to be a major market signal. Unless prices fall below the
50-day moving average of each index, yesterday's break should
result in no more than a minor correction of 4% to 5%.

The initial supports for the major indices were noted in
Tuesday's report
, and they are still in force. We will monitor the situation
closely since a penetration of the 50-day moving averages could
result in a double-top and a major turn down.

Traders on the long side of the market should cover all
positions. Long-term investors have already accumulated cash based
on prior recommendations and are nicely positioned to take
advantage of a sudden correction.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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